IRS Offers Reporting Relief for OBBB Tips, Overtime Deductions

As the 2025 tax year draws to a close, many employers have been scrambling to determine how to comply with the mid-year changes made by the 2025 OBBB—including the deductions for qualified tip income and overtime pay.  The IRS last week provided penalty relief via Notice 2025-62.  Employers will not be penalized for failing to provide a separate accounting of any amounts reasonably designated as cash tips or the occupation of the person receiving these tips.  Similarly, employers will not face penalties for failing to separately provide the total amount of qualified overtime compensation for qualifying employees.  The relief applies only for the 2025 tax year, in recognition that employers may not have the necessary information or systems in place to comply with the OBBB reporting obligations.  The IRS has also announced that Forms W-2 and 1099 for the 2025 tax year will not be updated to account for the OBBB-related changes.  For more information on the temporary deduction for qualified tip income, visit Tax Facts Online.  Read More: Link to Q8522.1.  Note: Q is updated.